Tinubu approves incentives, tax credits to deepen gas investments

…Calls for flexibility of local content policy, contracting cycle to encourage investors

…Orders NNPC, to raise contract thresholds to $10 million minimum
President Bola Ahmed Tinubu on Wednesday has approved incentives and tax credits to deepen investments in Nigeria’s gas sector.

In a statement issued on behalf of the President by Mohammed Idris, Minister of Information and National Orientation, the President noted that these new reforms are aimed at removing obstacles to investments in Nigeria and to harness the nation’s resources and diversify the economy for the benefit of all Nigerians.

The President clarified further that he aims to improve the investment climate and position Nigeria as the preferred investment destination for the Oil & Gas sector in Africa.

The Minister noted that the President is committed to have a private sector-led growth enabled by clear and inclusive government policies to achieve an enduring path to prosperity for all Nigerians.

Idris also reiterated that the President has pledged to sustain engagement and collaboration with key investors to ensure we improve the ease of doing business in Nigeria.

Amongst the reforms approved by the President yesterday include the initiation of the amendment of primary legislation to introduce fiscal incentives for Oil & Gas projects, reduce contracting costs and timelines, and promote cost efficiency in local content requirements.

President Tinubu approved Gas tax credits to non-associated gas (NAG) greenfield developments in onshore and shallow water locations, where the hydrocarbon liquids fall between 0-100 barrels per million standard cubic feet of gas.

”A 25 percent gas utilisation investment allowance shall apply on qualifying expenditure on plant and equipment incurred by a gas utilisation company in respect of any new and ongoing project in the midstream oil and gas industry.

“Implementation of commercial enablers for new brownfield and greenfield to incentivise investments for oil and gas projects in the deep water.

“These incentives address the lack of differentiation between NAG fields in PIA, yield competitive returns and prevent value erosion for ongoing gas utilisation projects, including NLNG Train 7 due to changes introduced by sections 6 and 9 of the 2023 Finance Act.

“It is anticipated that these investments will have a multiplier effect by catalysing economic activity around these projects. The anticipated impact of these investments extends beyond energy security. The projects are expected to relaunch economic activity and job creation in the sector, as well as stimulate activity in ancillary SMEs within local communities,” the statement read in part.

The President also directed the Ministry of Finance Incorporated (MOFI) and the Ministry of Petroleum Incorporated (MOPI) to take steps to procure the Nigerian National Petroleum Company Limited to raise the contract approval thresholds for Production Sharing Contracts (PSCs) and Joint Operating Agreements to not less than $10 million or the Naira equivalent.

Thr NNPC Limited and the Nigerian Upstream Investment Management Services Limited (NUIMS), in collaboration with the Nigerian Content Development and Monitoring Board (NCDMB) and industry stakeholders are to simplify the contract approval process according to the new directives.

”The duration period for third-party contracts awarded pursuant to a PSC or JOA is increased from three to five years with the option of renewal for an additional two years after the expiration of the initial three years.

“These directives are aimed at compressing the contracting cycle to 4-6 months, ultimately reducing project schedules, expediting the delivery of oil and gas products to the market, and increasing value to the country,” Tinubu instructed.

The President also urged the Nigerian Content Development and Monitoring Board in its implementation of the Nigerian Oil and Gas Industry Content Development Act, 2010 (“Local Content Act”) to consider the practical challenges of insufficient in-country capacity for certain services, and act in a manner that does not hinder investments or the cost competitiveness of oil and gas projects.

“By providing flexibility with the application of the Local Content Act, local operators will be encouraged to increase their capacity, thereby creating additional business opportunities, upskilling of the workforce, and ultimately creating more jobs and boosting economic growth,” he said.

“These incentives were developed in collaboration with the Federal Ministry of Justice, Federal Ministry of Finance, Federal Ministry of Petroleum, Federal Ministry of Budget and Economic Planning, Federal Inland Revenue Service (FIRS), Nigerian National Petroleum Company Limited (NNPCL), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Commission (NMDPRA), and the Nigerian Content Development and Monitoring Board (NCDMB),” a statement by the Minister revealed.

Similarly, the President has directed Special Adviser to the President on Energy, Mrs Olu Verheijen, to continue coordinating the aforementioned stakeholders to ensure the implementation of these directives within a stipulated time frame.